Yahoo Finance BA chaos may have exposed 'fundamental' weakness at airline, analyst warns
The computer systems meltdown at British Airways that caused Bank Holiday travel chaos may have exposed “fundamental” weaknesses in the way bosses run the flag carrier, a leading City analyst has warned.
BA, which is owned by FTSE 100 giant International Airlines Group, was plunged into turmoil after a worldwide IT failure sparked huge disruption to flights from Heathrow and Gatwick and knock-on upheaval at airports around the world, wreaking havoc for thousands of passengers.
Alex Cruz, who became BA’s chief executive a year ago, said the carrier believed the "root cause" of the crisis, which resulted in hundreds of cancellations and delays, was a “power supply issue” and not a cyber-attack.
Some US airlines suffered from similar computer outages caused by hardware problems. Damian Brewer, an analyst at RBC Capital Markets, said that if BA’s early diagnosis of the cause of the crisis is correct, bosses’ failure to prepare for such an incident in the the light of other carriers’ problems “suggests fundamental management and planning weakness”.
“It seems highly questionable why similar incidents with major US carriers in the last year have failed to see IAG move to ensure its airlines had plans in place to mitigate this risk, already seen elsewhere, and also to have contingency plans in place,” he said. “At present, it appears that BA management have seemingly not taken account of IT risk precedent already seen and already known at other carriers.”
Last August, Delta Air Lines was left reeling after a fire at a power control module shut-off its computer systems and grounded flights in a debacle that cost the carrier $100m (£78m). John Strickland, an aviation consultant at JLS Consulting, said that the cost to IAG from its own crisis could be of a similar magnitude.
“It will be significant and I think it’s reasonable to make a comparison with Delta because that’s another sizeable airline,” he said.
The company will have to count the cost of customer refunds, compensation and paying other airlines to carry passengers, as well as loss of revenue, Mr Strickland said.
“Then there’s the less apparent costs from a public point of view, like flying empty aircraft around to get them back to the right place, paying staff overtime, even things like the cost of repatriating baggage,” he added.
Mr Brewer said that the effects on BA’s business could be more long-lasting as “the bad PR and potential reputational aftermath will likely hit future revenues beyond the likely material impact on directly-related costs”.
James Walker, the chief executive of complaints and claims website Resolver, estimated BA’s bill for the chaos as being between £100m and £150m.
Recent moves by BA to cut costs have already angered customers, including its decision to scrap free food on short-haul flights.
